Power line upgrades plan fuels debates
Billions at stake in fight over who builds Wisconsin’s electrical grid
A regional plan for up to $23 billion in power line upgrades is adding new heat to a legislative debate over who should be allowed to build Wisconsin’s electricity transmission infrastructure.
The Midcontinent Independent System Operator, the regulatory agency that oversees interstate power transmission in Wisconsin and 14 other states from Manitoba, Canada, to the Gulf of Mexico, last week announced a massive new round of system improvements to improve reliability in the Midwest and better get power to customers from where it is generated.
In Wisconsin, the centerpiece of the plan is a massive 765-kilovolt transmission line that would extend from Minnesota to southeastern Wisconsin and into Illinois. The line would have three times the capacity of existing high-voltage lines, including a controversial 345-kilovolt Cardinal-Hickory Creek line in southwestern Wisconsin.
There aren’t a lot of details about what the new project will ultimately look like, or where the lines would would run. But the billions of dollars in construction contracts and the union jobs that go with it have quickly become a new focus of an ongoing debate in Madison about who should build such projects.
That debate is focused on legislation that would create a construction monopoly for in-state transmission companies American Transmission Company, Xcel Energy and Dairyland Power Cooperative, allowing them to avoid competitive bidding for projects that connect to their existing power lines.
At stake for the utilities is billions of dollars in construction contracts over the next decade to connect customers to new, geographically disperse sources of renewable energy, meet rising power demand, and protect the system from storms and other disruptions.
The utilities argue they can do the work at a lower cost by working with an existing workforce in an area they know well, and within the regulatory purview of the state’s Public Service Commission. They’re joined in pushing for the bill by construction and electrical unions concerned that work they would could go to non-union, out-of-state companies.
The opposition includes an unusual collection of
groups that span the ideological spectrum. It includes Americans for Prosperity, the Wisconsin Industrial Energy Group, Associated Builders and Contractors of Wisconsin, Clean Wisconsin and the Citizens Utility Board of Wisconsin and AARP. Their argument: Competitive bidding would result in lower costs that can hold down electric bills for Wisconsin residents and businesses.
Eight MISO states have adopted right of first refusal, or ROFR, laws since the Federal Energy Regulatory Commission opened transmission projects to competition in 2011. Work on the new power line would be the first major test of competitive bidding on Wisconsin transmission projects.
In Wisconsin, the bill’s fate is still murky and the subject of intense lobbying efforts by utilities and labor unions to get the legislation passed.
The bill was approved by the state Assembly in February, but a Senate vote has not been scheduled as Republican leaders continue to try to rally support with just more than a week left in the legislative session. As of Thursday, a spokeswoman for Senate President Chris Kapenga, R-Delafield, said there did not appear to be enough Republican votes to pass the proposal.
After a public hearing in November, the Senate Committee on Utilities and Technology voted 4-1 to recommend the bill for passage. But once the Assembly sent the bill to the Senate it was referred to the Senate Committee on Natural Resources and Energy rather than the chamber’s Committee on Organization, which schedules bills for floor votes. The Senate president is responsible for determining which committee receives a bill.
“The Right of First Refusal (ROFR) bill is a lobbying effort to give Wisconsin utilities the ability to limit bidding on the building of transmission lines. As a business owner, I support competitive bidding. Keeping power reliability high at the lowest possible cost is priority #1 on this, especially as we battle through Bidenomics inflation,” Kapenga said in a statement.
A spokesman for Sen. Rob Cowles, RGreen Bay, did not respond to a message asking whether the bill would receive a vote in the committee, which he chairs.
And a spokesman for Senate Majority Leader Devin LeMahieu, R-Oostburg, did not respond to a message asking whether the bill is still a priority.
The proposed transmission line is part of what’s known as MISO’s Tranche 2, the second of four phases of system improvements. Expected to be finalized by the MISO board of directors later this year, the plan also calls for significant investment in smaller 345-kilovolt lines and 16 new or upgraded substations, primarily in southeastern Wisconsin.
“This is really important because it’s really moving lower-cost power from where it’s generated to where it’s being used, and identifying those facilities in our state that are helping deliver that lower-cost power,” said Bob McKee, ATC’s director for strategic projects and execution.
Cost estimates for individual projects are not yet available, but the Wisconsin Industrial Energy Group estimates the Wisconsin project costs could top $5 billion. WIEG, which represents the state’s 15 largest industrial energy users, is part of the coalition opposing the ROFR bill.
ATC, which serves eastern and southern Wisconsin, is primarily owned by WEC Energy Group, Alliant Energy and Madison Gas and Electric, with cooperative and municipal utilities owning about 12%. The utilities have a stake in the debate from both a reliability standpoint, and also the 10.5% profit they earn on owning and operating the power lines.
ATC officials said the incumbent providers have a long-term advantage that opens the door to long-term cost savings for customers. Both construction costs and longer-term operating costs for interstate MISO projects are eligible for cost sharing across the region, but companies that already have operations in the state are able to bill MISO for a share of their already embedded costs.
Aproject that adds 5% to ATC’s transmission portfolio, for instance, would allow ATC to bill MISO for about 5% of its total operating cost annually, said Mike Hofbauer, ATC’s executive vice president and chief financial officer. That could add up to a billion or more in savings for Wisconsin energy customers over the 40- or 50-year lifetime of a major transmission project, he said.
“If we don’t have a ROFR law, we’re saying, well, we’ll eat the whole bill ourselves, rather than take advantage of the rule that allows us to spread out more costs to other states,” said Ellen Nowak,
ATC’s vice president for regulatory and government affairs.
Opponents say those long-term savings are overstated and pale in comparison to cost reductions of 20% or more that could be achieved based on competitive bidding in other states. In addition to lower capital costs, winning bids included reduced profits, competitive financing packages and financial protection from cost overruns.
Tom Content, executive director of the Wisconsin Citizens Utility Board, said competitive bidding could be especially important for controlling the cost of the transmission line, which at 765 kilovolts is unlike anything previously built by companies operating in Wisconsin.
“It’s a big number,” he said. “There are arguments that there could be long-term savings from building some of this from this transmission build-out, but giving an automatic path to the local utility, without any potential for cost caps or reduced (profits) that are enabled by competitive bidding, would be a lost opportunity for customers and businesses.”
ROFR critics also point out that competitive bidding doesn’t lock the incumbents out or put them at a disadvantage, pointing to Dairyland Power Cooperative winning the only competitively bid project to date in Wisconsin — a $180 million, 345-kilovolt line from Mankato, Minn. to Blair, Wis. — that was part of MISO’s Tranche 1.
“An open, competitive bidding process ensures the best deal for ratepayers. If utility companies have the ‘inherent advantages’ by having a footprint in Wisconsin like they claim, then every bid should reflect that, and they should have no issue winning,” said Jerry Ponio, legislative director for AFP-Wisconsin.
“Many people, including legislators, we believe, are receptive to that argument — the best bid can and should win without eliminating competition.”
Nowak pointed to Dairyland’s experience bidding on its project to support one of ATC’s key criticisms of a bidding process managed by MISO: it’s costly, cumbersome and can take a year or more longer than getting project approval through the Wisconsin Public Service Commission. In the Dairyland case, no other company bid on the work.
“It cost them $150,000 to put a bid in plus there’s a lot of staff time. And, and I look at that, and I go, how is that an efficient federal process?” Nowak said.
According to a Wispolitics.com analysis of lobbying efforts over the last six months, the ROFR legislation is the only one of the three most-lobbied bills not to have reached Gov. Tony Evers’ desk — the other two being an overhaul of the state’s alcohol industry and public funding for improvements to the Milwaukee Brewers’ stadium.
AFP ranked seventh in the analysis, spending $229,070 and 736 hours on lobbying over the last six months. The group reported to the state Ethics Commission that 23% of its lobbying efforts were spent working against the transmission bill.
Right behind AFP was ATC, which reported spending $217,357 and 967 hours on lobbying during the same period. Half of its lobbying efforts were related to backing the ROFR bill, according to the company’s report with the Ethics Commission.
Two other groups reported triple-digit lobbying hours on the bill: the Wisconsin Industrial Energy Group with 150 hours against it, and WEC Energy Group with 183 hours supporting it.
All told, 40 groups have registered to lobby on the Assembly version of the bill, logging 1,188 hours on it. Of those registered, 26 groups are in favor, 11 are in opposition and three are registered as neutral. Lobbying hours in favor of the bill far outpace those against, at 784 to 394.
“A lot of money has been spent on both sides to get this done,” said Todd Stuart, WIEG’s executive director.
“They’ve got 50 lobbyists and can’t get 17 Republican votes in the Senate — that shows you you have a bad bill.”